Samjong KPMG published a report on the 8th analyzing non-performing loan (NPL) market trends and projecting increased supply in the second half alongside more selective investment approaches. The report attributes this outlook to the intersection of economic slowdown and potential benchmark interest rate hikes. According to Financial Supervisory Service data cited in the report, domestic banks' NPL ratio in Q1 this year reached 0.60%, continuing an upward trend since Q3 last year, with total NPL volume rising to 17.7 trillion won. The proportion of NPL disposal through sales expanded from 16.4% in 2022 to 36.2% last year, creating growing investment opportunities in the distressed debt market.
Domestic Bank NPL Ratio Reaches 0.60% in Q1
The Financial Supervisory Service data cited in the Samjong KPMG report shows domestic banks' substandard-or-below loan ratio at 0.60% for Q1 this year, maintaining an upward trajectory that began in Q3 last year. Total NPL volume increased to 17.7 trillion won. The share of NPL disposal conducted through sales grew from 16.4% in 2022 to 36.2% last year, indicating a structural shift in how financial institutions manage distressed assets.
Specialized Investors Account for 90.3% of NPL Market
The report documents that 8 trillion won in outstanding principal balance (OPB) was supplied to the market in both 2024 and 2025. As of Q2 this year, specialized NPL investment firms—including Yonhap Asset Management, Woori Financial F&I, Daeshin F&I, and Hana F&I—account for 90.3% of total investment volume. These specialized investors have already purchased approximately 22 trillion won in NPLs since 2023. Industry observers note that these firms, having acquired substantial NPL portfolios, are expected to apply stricter investment criteria for new acquisitions in an environment of rising funding costs.
Samjong KPMG Projects Stricter Investment Criteria in H2
The report forecasts that high inflation, high exchange rates, and weak regional economic conditions will persist in the second half, driving up corporate loan delinquency rates and increasing domestic banks' and non-bank financial institutions' need to dispose of NPLs. The report diagnoses that strategies carefully weighing funding costs and recovery probability are essential for new investments, given rising funding rates and the growing possibility of extended recovery periods due to weak regional real estate markets. Kim Jung-hwan, Samjong KPMG NPL Advisory Leader, stated: "It is necessary to establish a risk management system that comprehensively considers funding strategies accounting for the possibility of benchmark interest rate hikes, appropriate leverage management, and medium- to long-term recovery probability."
FAQ
What is South Korea's current bank NPL ratio?
According to Financial Supervisory Service data cited in the Samjong KPMG report published on the 8th, domestic banks' substandard-or-below loan ratio reached 0.60% in Q1 this year, with total NPL volume at 17.7 trillion won.
How much of South Korea's NPL market do specialized investors control?
As of Q2 this year, specialized NPL investment firms including Yonhap Asset Management, Woori Financial F&I, Daeshin F&I, and Hana F&I account for 90.3% of total investment volume, having purchased approximately 22 trillion won in NPLs since 2023.
